A current study by NADA found that there is a serious shortage of technicians at dealerships, totaling somewhere around 20,000 – 25,000 positions nationwide. The trade group predicts that dealers will need another 46,000 more people by 2026. If you own or manage a dealership, this will keep you up at night, because today the parts and service area (aka “fixed ops”) comprises fully 49% of the dealership’s gross profit. It’s what keeps the lights on and pays the bills!
From another perspective, the average service tech generates $1,000 per workday in gross revenue for the store. A study by the Carlisle Group found that if dealers had enough techs, they could increase store revenue by 17%. Now you see why the shortage of car mechanics is so important.
New car stores employ about 317,000 service techs, which works out to about 19 per dealer according to NADA. But the average turnover rate for most skilled techs was 27.2% in 2016. How can you run a business with that kind of turnover, particularly when it is hard to find a replacement? The answer is, perhaps you cannot. How did we get in this situation? Let’s look at some details.
Inside the Shortage of Technicians
The NADA study says that about half of the entry-level techs that came from certified auto tech programs leave the store within two years. Why does this happen? Four factors are typically cited.
First, most dealers (probably 75%) use a flat rate pay plan, which pays a set amount per completed job (the “flat rate” time cited in the ship manual), rather than an hourly wage. This values speed over the quality of the repair. If the tech is highly talented, experienced and works fast, then he (99% are men) can do well. It is difficult, however, for an entry level tech to do this. Interestingly, only about 17% of aftermarket repair shops do this.
Second, there is really no detailed career path for a new tech or career ladder, except in very progressive shops. The new rep sees himself doing the same thing for the next 30 years, which may not inspire him.
Third is a corollary — the job requires long hours. If the customer was promised their car on Thursday and it is Wednesday night, then the mechanic is going to have to work overtime to get it ready for delivery. This can get old, especially if the mechanic has a family waiting for them at the dinner table.
Fourth, a new mechanic has to provide all their tools and pay for them himself (some dealers provide an allowance). This is a very expensive proposition, and a seasoned mechanic could easily have $40,000 worth of tools. Most new reps just do not make enough money to buy all these tools at the beginning of their career.
As if this was not enough to deal with for dealerships, something else is going on in the background: technicians are going to retire. The average tenure of a service rep today is 28 years, and it is projected that we will lose 60% of the techs to retirement in the next five years!
Beyond the Shortage of Technicians
Here is another factor: modern cars are extremely complicated and can be much more difficult to diagnose and repair than even cars made just five years ago. Vehicle maintenance today is about working with computers and software. Service intervals and factory recommendations must be scrupulously followed.
My friend, Paul, is a mechanic at the top of the profession who works in a Big Three shop. He said that if the vehicle owner does not change all the filters and fluids on the current line of diesel pickups per the maintenance schedule, then they are looking at a repair in the range of $7,000, and he does a lot of them.
Per the 2018 NADA Dealer Workforce Study, here is a snapshot of the average mechanic.
- 40 year old male
- 19 years of tech experience
- Earned $59k in 2017
- Paid by the job, not the hour
- Has been in the current job for 3.8 years
- Worked 42.5 hours a week in 2017
- Spends 70% of the time on light maintenance and repair
- Spent $5k to $50k on buying his own tools
- Says he would NOT recommend this occupation to a friend
One of the most important parts of all this is that there is a relationship between employee turnover and customer retention. According to a study in Fortune magazine, there is really a strong relationship between happy employees, happy customers, and increased profits in the store.
A NADA study showed that turnover is 43% for service advisors, 28% for service techs, and 25% for service managers. Fixing this problem requires a culture change in many dealerships that may or may not be possible. But if you are running a dealership, this is one of the most significant issues that you will have to face.
This article was reprinted in part from CrossCheck.com